OLDWICK, New Jersey – (COMMERCIAL THREAD) –AM Best confirmed the financial strength rating (FSR) of A ++ (superior) and the long-term issuer credit rating (long-term ICR) of “aa +” (superior) of Berkshire Hathaway Homestate Insurance Company (Omaha, NE) and its five P&C subsidiaries. These companies are collectively referred to as the Berkshire Hathaway Homestate Companies (BHHC). The outlook for these credit ratings (ratings) is stable. (See below for a detailed list of companies.)
The ratings reflect the strength of BHHC’s balance sheet, which AM Best considers to be the strongest, as well as its strong operating performance, neutral business profile and appropriate management of corporate risks.
Ratings also reflect BHHC’s highest level of risk-adjusted capitalization, as measured by Best’s capital adequacy ratio (BCAR), historically profitable operating performance, prudent loss allowance and track record. successful leadership team in managing operations. AM Best notes that BHHC’s core operating metrics consistently outperform the benchmarks of its peers, especially when the group’s superior long-term investment results are factored in. In addition, these ratings take into account the additional financial flexibility and support provided by the publicly traded parent company and the ultimate shareholder of the group, Berkshire Hathaway Inc. [NYSE: BRK A and BRK B].
The positive rating factors are somewhat offset by difficult market conditions and its company profile, which remains modestly concentrated in the workers’ compensation business line, primarily in California. About half of BHHC’s direct writing in 2020 was from California. This concentration has been reduced over time as the group has seen its California workers’ compensation business contract due to increased competition that has continued for several years. This decline was accompanied by a diversification of its workers’ compensation portfolio outside of California and strong growth in other categories of businesses, including commercial automotive and lines of business. property. Nonetheless, the large block of workers’ compensation cases in California still exposes the group to an increased level of regulatory, judicial, legislative and competitive risk compared to its peers.
Another offsetting rating factor is the risk associated with a wide allocation of investments in equity securities, which remains a potential source of earnings volatility and capital appreciation.
The FSR of A ++ (Superior) and the long-term ICR of “aa +” (Superior) were confirmed with a stable outlook for Berkshire Hathaway Homestate Insurance Company and its following P&C subsidiaries:
Cypress Insurance Company (San Francisco, CA)
Oak River Insurance Company (Omaha, NE)
Redwood Fire and Casualty Insurance Company (Omaha, NE)
BHHC Special Risks Insurance Company (North Liberty, IA)
Continental Divide Insurance Company (Denver, CO)
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